Range: What’s in stock

With thousands of funds available, not every investment platform will stock all the funds you want.

If your heart’s set on a particular fund, then check your preferred platform carries it before signing up. Just grab the fund’s ISIN code from the fund provider’s website (you’ll find it on the fund fact sheet) and stick it into the platform’s search engine to be sure they have it.

UK online stockbrokers will usually offer most or all of the ETFs listed on the London Stock Exchange. If you want to trade say, US-listed ETFs, then call the broker directly to check availability.

Keep fees low

Other than fund choice, the main point of difference between execution-only investment platforms is the amount of fees they can dream up.

Naturally, passive investors like to cut prices like Wembley groundsmen like to cut grass, so be aware of:

Platform charges

ISA annual management charge*

SIPP annual management charge

Inactivity fees* (paid if you haven’t traded in a while)

Dealing fees

Dividend reinvestment fees

Fund switching fees (moving out of one fund to another)

Fund transfer fees (moving your funds to another platform)

Cash withdrawal fees*

I’ve asterisked the fees that you shouldn’t have to pay because there are good platforms out there that don’t levy those charges.

Dealing fees will apply to ETFs, but they are easily avoided for index funds. If you’re an investors with less than £20,000 in assets and like to make monthly investment contributions, then choose a broker who charges a percentage platform fee but doesn’t charge dealing fees for funds.

A few other wrinkles to look out for:

Some brokers will offer a batch of commission-free trades that may make their charges worth paying, if you’re active enough.

Check that your platform’s list of charges includes VAT. Some do, some don’t.

If you’re assets amount to more than £20,000, then it’s usually better to pay low-ish flat-fees than a percentage nibble of your assets that’ll grow into an almighty chomp as your investments grow over the years.

Choose the right account

Most execution-only platforms offer several different flavours of investment account. It’s worth taking some time to select the right one for your needs.

Ignoring the siren calls of no-go attractions like spreadbetting, the typical choices for passive investors to consider are:

Dealing or trading account – To hold investments held out of an ISA or SIPP tax shelter.

Regular investing accounts – Put your contributions on auto-pilot with a monthly direct debit. If you’re buying index funds then you shouldn’t have to pay dealing charges, but do look out for the minimum contribution required per fund. £25 is very good, £50 is standard. If you’re into ETFs then you can’t do better than regular dealing charges of £1.50 per purchase.

ISA accounts – Wrap up your money in an ISA tax repellent! You’ll typically want an ISA dealing account for long-term investing, but the new Lifetime ISA that’s on its way could be worth considering if you’re young enough to qualify. There are Junior ISAs for children, too.

Note: The actual account terminology may differ, depending on the provider and the range of services they offer. Don’t be bamboozled.

Once you’ve plumped for an account, it only remains to register it online, hook it up to a bank account, and prime it with cash for your first investment. Debit card payments, direct debits and BACS transfers are the standard ways of doing this.

Are you being serviced?

Service is important, of course. But I don’t sweat it for a few reasons.

There is little to choose between the different platforms in my experience when it comes to service, from the perspective of a hands-off passive investor. Pick any company and you can always find horror stories from ‘Outraged of the Forum’ but that way can lie analysis-paralysis. You can also out the hundreds of comments beneath our broker comparison table for any recent talk of problems.

In practice, online investment platforms offer about the same level of service, diversity, and complexity you might expect from an online bank account. If you can operate one of those and you understand the principles of investing, then you’re in business.

Bear in mind that we passive investors are relatively low maintenance and have little need for the gold-plated services demanded by the more shrill voices online.

It’s ultimately a matter of priorities. One company with a superior reputation for customer service is Hargreaves Lansdown – but it’s far from the cheapest option.

If you feel you truly need that reassurance then go for it, but remember that small costs really add up over the long-term when investing.

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I prefer having 2 brokers for peace of mind, rock-solid HL for my pension, cheap-as-chips Iweb for ISAs and general

Brokers often have management charges for funds, but not for ETFs, so its worth thinking which you need to have before signing up.

Monthly investment is a nightmare to work out capitals gains on, so best avoided if sums are large. But then the fees are an issue for small sums, I prefer adding irregular lumps, provided you don’t suffer from market timing paralysis.

@JB – you prob have an ETF/IT based SIPP then? I was thinking of ditching HL as I’m at the ad valorem tipping point. But maybe I could just ditch and switch assets to exploit the fee cap on anything but funds..

@john b – worth clarifying that of course CGT implications only arise for non-wrapped holdings (outside ISA or SIPP)
Another issue for unwrapped holdings is to make sure you avoid accumulating versions of funds/ETFs as again, working out the tax implications is rather complicated.

Apologies in advance for the dumb question, but I’m an investment newbie. I’m in the position to be able to invest up to my S&S ISA limit. I like the look of the Vanguard products. LifeStrategy ACC funds look attractive for the opportunity to set up a ‘fire and forget’ direct debit sum of £1270 per month.

But I also like the look of their ETFs too. I’ll still want to invest £1270 each month – can I do this with ETFs and how (in broad terms) do the charges for regularly investing into a LifeStrategy compare to an ETF?

I realise charges depends on the platform I use but I’m just after a broad comparison of a regular monthly investment into a LifeStrategy Fund or an ETF.

@Rhino Yep, ETFs in HL, funds in Iweb. I don’t mind HL getting £200 p/a to run my pension. Not sure how Iweb’s business model is sustainable only getting a single £200 payment when you join.

For diversity I have Vanguard ETFs, Fidelity and Blackrock funds, but it is frustrating when there is only a fund for a segment when you wanted an ETF.

Finally clear the rump of a M&G regular savings fund this month. 12 real payments in, but quarterly dividend reinvestment for 7 years. Took 4 years to sell it without hitting CGT, horrid spreadsheet and hair pulling. Top tip, always look for ACC, not INC units, to avoid complications when investing outside wrappers.

@JB iweb also have a ~200 sipp charge per annum, not dissimilar to HL, I guess they live off that and their trading fee?

I like that you and VF give equal but opposite advice on CGT complication w.r.t acc or inc units. I would suggest you can’t both be right – but then again, maybe you can given the judicious use of an appropriately bad spreadsheet?

with ACC, the gain is rolled up in the unit price, so if you buy 10000, then 1000 units a year later, you just have to worry when divesting 2000 which purchase it came from, and there are rules for that.

(The cautious CGT calculation is to assume the difference between money invested and final valuation is all CG, not income, so when divesting 20% of the portfolio you are defusing 20% of the gain, and just keep that inside 11100 p/a) I’ve not come across a broker that does a good service working out CGT for you, has anyone else?

Sorry about the conflicting views about unwrapped holdings. My understanding is that the tax treatment of dividends and capital gains is the same irrespective of whether its an acc or an inc unit – so with an acc unit, you have to account for the income distributions (which are incorporated into the unit price rather than paid out, but usually paid with the same frequency as the dividend on the inc unit) and make sure you declare them as dividends and pay the appropriate tax. This is a lot more complicated for acc units than for inc units where you have an explicit payout. I do not automatically reinvest dividends from inc units.

I did learn this the hard way. Unwrapped dividends will need to be declared every year; CGT only comes into play when you make a disposal. That’s even more fun for acc units as you have to work out how much of the gain is capital gain and not dividend.

@JB careful here – I’m not sure you’re right. The thing with acc units is you have to be cognizant of the portion of the ‘roll-in’ that was dividends and what tax you may have already paid on those dividends, as you don’t want to pay tax twice, i.e. you shouldn’t pay any CGT on dividend income that has already been taxed.

I think I side with VF on this. Although working out CGT is bloody hard regardless of whether its inc or acc, I feel it is a bit more fiendish for acc (I’m going to have to jump through these hoops for the next tax return and I’m not looking forward to it)

I could be wrong though – as I’ve not yet had to fully work through both scenarios in anger (i.e. on the old tax return)

I’m very cautious with CGT, because If I had to pay it, I’m sure I’d get the sum wrong. If I make cautious assumptions, and keep at £10k with an £11k allowance, I needn’t mention it to the taxman, and we are both happy. As CGT only applies outside ISA/SIPPs, I always expect that I’ll never trigger it as I won’t have to sell so much at once. It would be a different story if you were saving for a house though.

Bed and breakfasting investments (and each fund tracking the same index is considered independent, so you don’t need to be out of the market for a month) and re-balancing should allow you to keep it under control, its just a danger if you are too passive and come back to a fund after a decade.

@JohnB – it sounds like your approach works for you, but I feel that in general, it is simpler to stick to income units/distributing ETFs in taxable accounts. I actively manage CGT in my taxable accounts – ie selling enough each year to keep within the CGT allowance (if there are gains of course!) which requires more accurate calculations.
I pay an accountant to work out my tax liability and she insists that I inform her of all capital disposals even if they are under the threshold. I don’t know if that’s her requirement or HMRC’s, but it does mean I have to keep my records in order!

what I’m getting at here is whether you can pick and choose to declare a CG on your return just because it sits under the threshold. I’m not sure you can as that CG may affect your marginal tax rate, i.e. in the same way that receiving an amount of dividends that sits below the dividend allowance *could* still push you into a different tax bracket.. hence you still have to declare it!

Ha, I’ve just spent the last 10 minutes googling exactly that question, but I haven’t found an answer!
I might have a look at last year’s tax returns later and see if any gains below the threshold were declared. Still won’t answer whether they MUST be declared though!

I found this from the self assessment guidance notes:
‘Fill in the ‘Capital gains summary’ pages if:
• you sold or disposed of chargeable assets which
were worth more than £44,400
• your chargeable gains before taking off any losses
were more than £11,100 (‘annual exempt amount’)
• you have gains in an earlier year taxable in
this period
• you want to claim an allowable capital loss or
make a capital gains claim or election for the year
• you were not domiciled in the UK and are
claiming to pay tax on your foreign gains on the
remittance basis
• you’re chargeable on the remittance basis and
have remitted foreign chargeable gains of an
earlier year
• you disposed of the whole or part of an interest
in a UK residential property when either
non-resident or UK resident and the disposal
was in the overseas part of a split year’

I did tax returns for 3 years while I had US derived, untaxed income. When I got rid of that, and was a basic rate taxpayer with everything taxed at source, they stopped after my 11-12 return. Very pleasant its been too.

Fill in the ‘Capital gains summary’ pages if:
• you sold or disposed of chargeable assets which
were worth more than £44,400
• your chargeable gains before taking off any losses
were more than £11,100 (‘annual exempt amount’)
(and other things about losses to offset, domcile etc)

So it seems they are pragmatic in not wanting to hear about piddly numbers under the threshold, and just assume that once you get to £45k disposal you need to prove it didn’t make a big enough gain.

CGT is decoupled from income tax allowances and rates as far as I know

When selecting brokers, bear in mind the compensation limit (£50,000? last I remember) for malpractice/financial failure.

Ideally spread investments across several brokers to keep within limit, or if that is too much of a pain and the investor is going knowingly to exceed the compensation limit, then choose a broker of long sound financial standing.

Theoretically the investors’ funds should be segregated, but don’t know whether this is ever policed? Perhaps others can thow more knowledgeable light on this aspect?

Think also this subject has been covered in previous articles by TI/TA?

The whole CGT thing for Inc/Acc used to drive me mad when I had to work it out on large unwrapped portfolios so I put together my own spreadsheet that works it all out. If anyone wants a copy let me know.

Thanks accumulator. Could you explain why spreadbetting is no go? If I make my CG and divi allowance every year, it seems to me that the tax saving would be worth paying the financing cost on an index future bet. If I place margin of 1/4 of my exposure I can still get some yield on the remaining 3/4 too.

I have this urge not to spread bet because it doesn’t feel like I’m “putting my money to work” but if it’s the better investment… It would make the tax return simpler too.

Something to consider here is that your employer will usually choose the investment platform for you for your work pension, so in fact there is no choice in relation to that.

And the platforms they choose (e.g Standard Life, Aegon) have appalling online portals which make it extremely difficult (intentionally I suspect) to understand the real costs of various platform specific blend funds and other charges.

It’s not that there’s no conceivable way in which a passively-minded investor could make use of spreadbetting, it’s just that it’s so far outside the wheelhouse as to not be relevant for The Accumulator’s strategy or audience. Spreadbetting takes monitoring, has higher risks one might not anticipate (e.g. changes to margin requirements), requires self-discipline (you might go in with a sort of passive approach but you have to resist beginning to drift into other areas, which is exactly what the platforms are designed to tempt you into doing) and so on. It’s also not possible to automate savings and rebalancing in the way that so benefits passive investors.

If someone has all the required traits and experience and is taking a portfolio-level view of all their assets, I wouldn’t argue for it never being part of their mix but this is a very specialist area. For the vast majority of passive investing readers, ISA allowances and pension contributions are going to easily cover all their tax-sheltering needs, especially if they start young and stay disciplined about using their allowances.

The issue with spreadbetting is (or was when I looked at it) that the companies impose stop loss limits on you, so it is baked in to the system that you sell on the dips. I’d have thought that made it antithetical to the passive investing philosophy that dips is either just noise, or buying opportunities.

I’ve been rolling a spreadbet on an index future for several quarters now, in order to live-test the costs and they actually seem very low indeed (~50 bps pa). It seems too good to be true but I’m dodging approx 1% in dvd tax, 1% in cgt and I can make 1% net by placing the non-margin cash in a high interest account.

By keeping 25% margin there is little chance I’ll be stopped out at the bottom. And by betting on futures there’s no divi for them to half-inch.

Agree though; if you have ISA/SIPP allowance remaining, or you have an itchy trigger finger it’s not for you. @TI, since you don’t, why not move your passive positions across after the next cgt crystallization?

there are several extra layers of risk if you use spread betting as a substitute for a long-term holding in an index fund. one is being stopped out. i had a discussion a few months back on MSE with a poster who said he used spread betting in a way which meant that he couldn’t be stopped out, regardless of what sudden spikes in prices might occur. i haven’t gone into the details of how that works (so i can’t confirm it does), but i see no case for using spread bets if you are leaving open even a remote chance of being stopped out. surely we are planning to hold index funds for decades (otherwise, why are we in equities at all?); extreme price spikes are to be expected at some point, and there is no way to tell in advance how big those spikes will be.

on top of that, you have spread betting platform risk. did you understand the contract completely? can the platform change the terms of the contract, and then stop you out? or close your account, without giving you sufficient notice so that you can replicate your positions elsewhere? is it safe for you to go on holiday and not read messages from the platform for a period of a few weeks or months? and so on. it’s a whole extra set of issues to keep on top of.

and then: never mind what the contract says – what if the platform goes bust and can’t honour its obligations? there are some protections, including separation of client money, but this can’t be as clear-cut as with a conventional platform that simply facilitates your buying and selling securities. if the bookmaker goes bust, your bet may not pay out what it should.

that is enough to put me off the whole idea. i wouldn’t go so far as to say that it should put everybody off, but there are some serious issues to consider.

at a minimum, start by using ISAs and pensions. and there is scope (given the dividend allowance and the CGT allowance) to have substantial unwrapped investments without paying any tax. IMHO, doing a few calculations to make sure you stay within your CGT allowance is a lot easier than trying to use spread betting safely.

We live overseas and currently pay tax only on dividends from UK shares. We try to keep within the UK basic rate bands. As a result, from now on we will only pay 7.5% on dividends received above the personal and dividend allowances. My ETFs are held overseas so we don’t need to declare them to HMRC but would only attract dividend tax if onshore..
Now to the point! We don’t hold UK funds (OEICS, etc..) because I believe we have to pay income tax rates on the dividends. Obviously these rates are higher than the rate payable on share dividends. Am I correct in saying this? We can’t wrap our holdings in ISAs as we are long term non-residents of 41 years. Some of the Vanguard non-ETF funds look attractive.

@mynameseccles, OEIC distributions are taxed according to their underlying holdings- equity funds as dividends, bond funds as interest. for funds with a mix of assets, it depends on the overall mix – not sure of the precise rule, but vanguard lifestrategy 60 is taxed as a dividend.
That’s my understanding anyway, perhaps others (or google) can confirm!

a quick google confirms my understanding, and also that a fund can distribute interest rather than dividends if it holds 60% fixed interest or more. Suspect there’s a monevator article covering it too 😉

@mynameseccles, I am in a similar position – I live overseas but not happy that I understand the investing options enough to trust it with my capital. Is there anything preventing me from investing in the UK and declaring my investment income and paying taxes here eg. do investment platforms require clients to be UK resident? I accept that ISA and SIPP options are out of my reach as a non resident, but non-taxable schemes here (France) are more limited. Thanks

Forgot to say, I have just discovered this website and so working my way through the various articles – great job. I have also signed up to Ratesetter using the link here so win-win so far…long may it continue

@grey gym sock: There has never been a three day period in which the FTSE100 fell >25%, plus you get a call if you need to place margin. Even if you were to be stopped out or have your account closed for no reason, it’s only a short void period so the expected return you miss is very low (mean reversion is not that strong). As for counterparty risk, the separation of client money is good enough for me.

I suspect that the real reason people don’t like spread betting is the same reason I felt uncomfortable with it at first. Basically you just don’t get that feeling of ownership that you get with ETFs. You also have to think about what to do with the 3/4 of your money that isn’t margin. None of that adds up to a bad investment case though.

“There has never been a three day period in which the FTSE100 fell >25%” … but we both know it could happen, don’t we? and if you need to be ready to meet margin calls, you can never go away from access to comms, and expect your investments to be fine.

my more general reason to be wary of spread betting is that many clever people in finance have thought they were doing something to get themselves ahead, and have ended up doing the opposite. for instance, look at LTCM. and extreme financial events – markets crashing, spread betting firms failing, etc – clearly have some tendency to cluster.

Beware too that Spreadbetting companies can and have changed their margin requirements in the past — from memory this was an issue in the financial crisis, and it precipitated what was effectively ‘forced deleveraging’ in some small cap stocks.

I can’t recall the detail and I don’t think it applied to index bets, but still…

However as I’ve said many times about all kinds of investments (e.g. P2P), there’s a big difference between seeing these additional risks and not putting 100% (or 70%) of your money into a spreadbetting account, and not putting say 5% in. Diversification of platforms/investments/strategies helps with a lot of these sorts of idiosyncratic risks.

(Still think spreadbetting is best avoided by the vast majority of passive investors, and to be honest as many active ones, also. The reason spread betting is left tax-free by the government is likely because so many make losses, and thus no tax is being foregone! (And perhaps the opposite).)

Anticipating the weekend readings post, there’s a decent piece in the FT on a gloomy MGI study of future stock returns.

Any tips for where I might invest the piece of my SIPP portfolio earmarked for buying if the market crashes? I.e. something risk free and liquid with modest returns in the lower single digits? (probably doesn’t exist, but just in case I am being slow and missing something :))

Thanks for your replies all. Neverland makes a good point. The counterparty risk is non-zero but I feel it is much lower than many other risks I take.

Grey gym sock: A >25% crash could happen without me placing more margin but it wouldn’t be the end of the world (the void period that is).

TI: If the spreadbetting firms were to double their margin requirements to 1%, the 25% equity I suggest would still leave one with a 24% buffer. I agree that platform risk should be spread but 25% of unwrapped equity exposure is well within limits in my case. You’re right in saying it’s a poor choice for most investors though. How about you?

For me the 2% pa outperformance I expect over holding ETFs is well worth the above risks. Since this gain come from tax avoidance I think it is believable.

@William III
“Any tips for where I might invest the piece of my SIPP portfolio earmarked for buying if the market crashes? I.e. something risk free and liquid with modest returns in the lower single digits?”

Just off the cuff, perhaps Short IG Corps IS15?
Low volatility but afraid not totally risk/volatility free.

Vince,
All expats have problems opening UK share dealing accounts (and bank accounts) from abroad due to EU money laundering rules. I don’t know how EU residents are treated. I use HSBC in Hong Kong, and TDI in Luxembourg. The latter charge a quarterly fee which may be uneconomic if your total investment is smallish but Toronto Dominion Bank is quite solid. I also have an account with Barclays in the UK who normally don’t accept expats. Barclays accepted us as my wife is considered resident under the overseas diplomatic service, armed forces and British Council rules.

Saxo Bank will allow expats to open share accounts but I was put off by litigation problems some time ago.

UK brokers and platforms are quite safe as they can’t easily get their hands on your shares. Best to stick to big operators like the banks.

Generally speaking, expats pay the same tax as UK residents on UK earnings including dividends and property rents. I don’t pay tax on my Hong Kong and Luxembourg holdings. The good news is: we are not liable for capital gains tax so you should sell and buy back your shares and funds just before returning to the UK.
Beware! I’m not an expert!

Just to add to the list of fees that brokers dream up, there is one that a lot of people are not aware of – foreign exchange fees on ETF dividends. If you invest in an ETF, say Vanguard’s S&P 500 ETF, the fund is run in dollars, even though you can buy a version of the ETF security that is priced and traded in pounds, the underlying fund is still run in dollars. This means that dividends are paid to your broker in dollars, the broker converts to pounds (unless you have a multi-currency account), taking a cut for the conversion before crediting you.

I have my SIPP with Hargreaves Lansdown and they charge 1.5% I believe. Youinvest are better, but still too high in my opinion, at 0.5%.

One way of avoiding this additional fee is to invest in ETFs that reinvest income. iShares offer some good value reinvesting ETFs in their Core range.